Legal Considerations within Bids

Some businesses may be reluctant to participate in public sector procurement as they seem lengthy and complex – this is often a missed opportunity. With some understanding and guidance (perhaps through engagement with a bid specialist), businesses can start winning public sector contracts.

Before bidding, businesses will need to identify the opportunities that align with their business. They should consider the timetable, the expectations and requirements, and the scoring methodology. After identifying the right opportunity, they must then consider the legalities of the contract and agree on the steps to take to satisfy these.

It is vital to fully understand all the requirements from the bid documentation – both commercially and legally. The Q&A process is a useful tool to understand all of this.

Businesses also need to understand what is on offer – whether there is negotiation within the commercial or legal aspects. Where negotiation is permitted, a balance must be struck between benefit and competitiveness. Negotiations must not be too aggressive as this can portray a negative image to the buyer. Where negotiations are not possible, businesses must understand what they are being asked for, and be comfortable with all of those risks and demands. After assessing this, arrangements to mitigate these risks should be sought.

Sometimes, there are non-negotiable aspects of the contract which do not marry with the requested service. In this case, businesses should explain to the buyer why this is not what is needed here and that there is a better solution. An effective method is through the use of the clarification question process, which can be a tool to influence issues like these.

Consider the legal risk

Service-Level Agreements (SLAs) set out service performance expectations and service standards for the supply of goods and services, including delivery timelines and the penalties attached for failure to meet those SLAs. It is important that businesses look carefully at this and work out what level of confidence they have in being able to comply with contractual obligations versus the risk of the contract quickly becoming unprofitable or putting them in breach.

TUPE (Transfer of Undertakings and Protection of Employment) is a set of rules that apply in the background to protect the rights of employees. These rules tend to apply where services are being outsourced (e.g., IT services, catering services or cleaning contracts). Bidders must be aware of this complex legal requirement if winning contract will result in them being the sole provider of services. Careful thought must be given on whether there is an existing supplier, as it may result in their staff being taken on by the new provider. Furthermore, providers must also consider what happens to their staff at the end of each contract if another supplier takes over.

The public sector has increasingly taken a hands-off approach to TUPE (Transfer of Undertakings – Protection of Employment – Regulations 2006) and will leave the issue between the outgoing provider and the incoming provider. Often, TUPE will not play a major role within the tender itself, however, it is vital that bidders investigate this and seek professional advice where needed.

Liability tends to be placed firmly on the shoulders of the supplier as contract terms are aimed to protect the buyer with limited liability. There is often no reciprocal restrictions or limitations on the supplier’s liability – a potentially unlimited liability. Bidders must check the contract to ascertain whether there is a liability cap in place. If not, try and negotiate with specific caps linked to certain areas (e.g., data protection). Discern what risk mitigation can be put in place if you are not able to negotiate.

Indemnities are a promise to pay out in an unfortunate event. It is useful to conduct an initial search for any indemnities within a contract. Examples include breach of contract, confidentiality, or data protection. It is important to understand the scope of the indemnity and whether it is covered by the liability cap. Any indemnities expressed to cover all breaches of contract should be avoided as this is a very favourable term for the buyer. Indemnities should be specific and linked to certain aspects such as data protection, bribery, or confidentiality.

In summary, businesses must understand the risks of each contract – identifying where the risks cannot be negotiated. It is crucial to have a clear understanding of the steps to take a business to ensure these risks are minimised.

Article based on a LinkedIn Live Interview with Julia Ellis from Ignition Law.